<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the quarterly period ended September 30, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the transition period from __________ to __________
Commission file number 33-8104/0-25892
ORGANIC SOLUTIONS, INC.
(Exact Name of Small Business Issuer as Specified in its Charter)
DELAWARE 74-2423728
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
8023 VANTAGE DRIVE, SUITE 600
SAN ANTONIO, TEXAS 78230
(address of principal executive offices)
210-340-4642
(Issuer's telephone number, including area code)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the preceding 12 months (or
for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
----- -----
State the number of shares outstanding of each of the issuer's classes of
common stock as of October 27, 1996
14,473,638
Transitional Small Business Disclosure Format
Yes No X
----- -----
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PART I
ITEM 1. FINANCIAL STATEMENTS
ORGANIC SOLUTIONS, INC.
AND SUBSIDIARY
BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS September 30, 1996
<S> <C>
CURRENT ASSETS
Cash $ 49,600
Inventory 301,400
Accounts Receivable
Trade 30,900
Officers 26,500
-----------
408,400
PROPERTY AND EQUIPMENT, net of accumulated
depreciation of $58,500 at September 30, 1996 1,434,700
OTHER ASSETS
Deposits 13,200
-----------
$ 1,856,300
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable
Trade $ 499,000
Officers and shareholders 11,700
Accrued Expenses 306,200
Note Payable to shareholders 1,024,800
-----------
1,841,700
Capital Lease Obligation 398,000
STOCKHOLDERS' EQUITY
Common Stock, par value $.001 per share:
authorized 200,000,000 shares, issued
14,473,638 at September 30, 1996 14,500
Additional Paid-in Capital 9,210,000
Unearned Compensation ( 612,500)
Retained Deficit (8,995,400)
-----------
( 383,400)
-----------
$ 1,856,300
===========
</TABLE>
See accompanying notes.
2
<PAGE> 3
ORGANIC SOLUTIONS, INC.
AND SUBSIDIARY
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Quarter Quarter
Ended Ended
September 30, 1996 September 30, 1995
<S> <C> <C>
REVENUES $ 80,900 4,650
COSTS OF GOODS SOLD 68,000 1,850
--------- ----------
GROSS PROFIT 12,900 2,850
EXPENSES
Advertising 70,000 152,300
Sales and Marketing 90,900 200,350
General and Administrative 650,900 352,500
Depreciation and Amortization 32,700 2,800
--------- ----------
844,500 707,950
NET LOSS $(831,600) (705,100)
========= =========
NET LOSS PER SHARE $ (0.06) $ (0.05)
========= =========
</TABLE>
See accompanying notes.
3
<PAGE> 4
ORGANIC SOLUTIONS, INC.
AND SUBSIDIARY
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Quarter Quarter
Ended Ended
September 30, 1996 September 30, 1995
<S> <C> <C>
OPERATING ACTIVITIES
Net Loss $(831,600) (705,100)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 32,700 2,800
Amortization of Employee Stock Grants 187,500
(Increase) Decrease in inventory (3,300) 24,800
(Increase) Decrease in accounts receivable (24,000) 194,400
(Increase) in Prepaid Expenses (296,200)
Increase (Decrease) in Accounts Payable 47,300 (85,900)
Increase in Accrued Expenses 87,300 75,100
--------- ---------
327,500 (85,000)
--------- ---------
Net (decrease) in cash due to
operating activities (506,300) (790,100)
INVESTING ACTIVITIES
Purchase of property and equipment, net of returns 5,800 (125,550)
Organization costs/Deposits 3,400 (34,000)
--------- ---------
Net cash used in investing activities 9,200 (159,550)
FINANCING ACTIVITIES
Decrease in capital lease obligation (4,500) --
Sale of shares of subsidiary 50,000 --
Borrowings under notes payable to stockholders 474,900 775,000
--------- ---------
Net increase in cash due to
financing activities 520,400 775,000
--------- ---------
Net increase (decrease) in cash 25,500 (174,650)
Cash at beginning of period 24,100 211,300
--------- ---------
Cash at end of period $ 49,600 $ 36,750
=========
</TABLE>
See accompanying notes.
Note A - Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary to make the
financial statements not misleading have been included.
4
<PAGE> 5
ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATION
Revenues for the quarter ended September 30, 1996 (the "1996
Quarter"), were $80,900, $76,250 more than the $4,650 reported for the quarter
ended September 30, 1995 (the "1995 Quarter"). Revenues for the 1996 Quarter
were largely generated by the initial operations of the Company's NutraFeed,Inc.
subsidiary ("NutraFeed"). Increases in production are anticipated during the
remainder of the fiscal year. Sales of the Company's organic insecticide
products increased $11,850 from the 1995 Quarter. Sales during the 1995 Quarter
largely represent follow-up sales to directly to retail customers.
Advertising expenses of $70,000 for the 1996 Quarter decreased
$82,300 from the $152,300 reported for the 1995 Quarter. Expenses for the 1996
Quarter can be chiefly attributed to expenses relating to the Company's
participation in the National Hardware Show in Chicago in August 1996.
Expenses for the 1995 Quarter were associated with the development of the
Company's overall marketing campaign as well as some television production
expense.
Sales and marketing expenses of $90,900 for the 1996 Quarter,
decreased $109,450 from the $203,500 reported for 1995 Quarter. A great deal
of the expense for the 1996 Quarter can be attributed to costs associated with
initial sales calls, many of which were developed at the National Hardware
Show. A portion of the decrease is due to the reclassification of expenses
associated with the NutraFeed operation to General and Administrative
Expenses.
General and administrative expense of $650,900 for the 1996 Quarter,
increased $298,400 from the $352,500 reported for the 1995 Quarter. The
increases are attributable, primarily, to the amortization of expenses
associated with employee stock grants and the reclassification of NutraFeed
expenses discussed above.
Depreciation increase $29,900 from the same period of the prior year.
This increase is attributable to commencement of production at NutraFeed.
5
<PAGE> 6
LIQUIDITY AND CAPITAL RESOURCES
The Company is in the process of a private placement of NutraFeed,
Inc. securities. The private placement would involve the sale of both
previously unissued shares of common stock from NutraFeed's authorized, but
unissued shares and from the Company's holdings of NutraFeed common stock.
Proceeds from the sale of NutraFeed's previously unissued shares would be used
to provide working capital, purchase additional equipment at the Claremont
location, finance additional NutraFeed operations and repay the Company
amounts advanced to NutraFeed over the past year. Existing loans from
shareholders may also be converted to equity. Proceeds from the Company's
holdings of NutraFeed common stock along with proceeds from the repayment of
amounts advanced to NutraFeed would be utilized for working capital purposes
as well as anticipated advertising and promotional expenses associated with
the roll out of the insecticide product line to mass merchandisers.
Additionally, the Company is exploring other fund raising
alternatives.
Based on the infusion of capital through the private placements, the
Company believes it will be able to adequately meet its anticipated short-term
requirements for working capital, advertising and marketing expenditures and
capital expenditures. However, if the Company is unsuccessful in implementing
its business plan or in raising additional capital, the Company could, in the
worst case, be forced to cease operations.
PART II
ITEM 1. LEGAL PROCEEDINGS
In 1995, the Company entered into an agreement with U.S. Mexico
Trade, Inc. ("USMT") whereby USMT was to assist the Company in establishing
business operations in Mexico. The Company filed suit to recover fees of
$29,000 paid to USMT alleging breach of contract. USMT has filed a
counterclaim alleging it is due unpaid fees, lost profits, and exemplary
damages totaling $5,300,000. The Company and its legal counsel believe the
counterclaim is without merit, and the Company intends to defend the case
vigorously. Although the ultimate outcome of this counterclaim cannot presently
be determined, the Company does not believe the counterclaim will have a
material adverse effect on the Company's financial position or results of
operation.
In the normal course of business, the Company is named in various
legal actions in addition to those discussed above. Although the ultimate
outcome of these actions cannot be determined, the Company does not believe
these actions will have a material adverse effect on the Company's financial
position or results of operations.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
*3.1 Certified copy of Certificate of Amendment of Certificate of
Incorporation. Incorporated by reference to Exhibit 3.1 to
the Company's report on Form 8-K filed on November 11, 1994.
*3.2 By-laws adopted by shareholders on October 26, 1994.
Incorporated by reference to Exhibit 3.1 to the Company's
report on Form 8-K filed on November 11, 1994.
27. Financial Data Schedule
* Previously Filed
b. Report on Form 8-K
No reports on Form 8-K were during the quarter.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned thereunto duly
authorized.
ORGANIC SOLUTIONS, INC.
(Registrant)
Date: November 13, 1996 /s/ John L. Sharp
------------------
John L. Sharp
Principal Accounting Officer
8
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Exhibits
*3.1 Certified copy of Certificate of Amendment of Certificate of
Incorporation. Incorporated by reference to Exhibit 3.1 to
the Company's report on Form 8-K filed on November 11, 1994.
*3.2 By-laws adopted by shareholders on October 26, 1994.
Incorporated by reference to Exhibit 3.1 to the Company's
report on Form 8-K filed on November 11, 1994.
27. Financial Data Schedule
* Previously Filed
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 49,600
<SECURITIES> 0
<RECEIVABLES> 57,400
<ALLOWANCES> 0
<INVENTORY> 301,400
<CURRENT-ASSETS> 408,400
<PP&E> 1,493,200
<DEPRECIATION> 58,500
<TOTAL-ASSETS> 1,856,300
<CURRENT-LIABILITIES> 1,841,700
<BONDS> 398,000
0
0
<COMMON> 14,500
<OTHER-SE> (397,900)
<TOTAL-LIABILITY-AND-EQUITY> 1,856,300
<SALES> 80,900
<TOTAL-REVENUES> 80,900
<CGS> 68,000
<TOTAL-COSTS> 844,500
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (831,600)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (831,600)
<EPS-PRIMARY> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
